Sonic (SONC) Showing Signs Of Being Water-Logged And Getting Wetter
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.
Trade-Ideas LLC identified
(
) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Sonic as such a stock due to the following factors:
- SONC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $40.2 million.
- SONC has traded 2.2 million shares today.
- SONC traded in a range 284.7% of the normal price range with a price range of $2.47.
- SONC traded below its daily resistance level (quality: 5 days, meaning that the stock is crossing a resistance level set by the last 5 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).
Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.
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More details on SONC:
Sonic Corp. operates and franchises a chain of quick-service drive-in restaurants in the United States. As of August 31, 2014, it operated approximately 3,518 Sonic Drive-Ins from coast to coast in 44 states, which included 391 Company Drive-Ins and 3,127 Franchise Drive-Ins. The stock currently has a dividend yield of 1%. SONC has a PE ratio of 40.1. Currently there are 6 analysts that rate Sonic a buy, 2 analysts rate it a sell, and 3 rate it a hold.
The average volume for Sonic has been 933,500 shares per day over the past 30 days. Sonic has a market cap of $1.9 billion and is part of the services sector and leisure industry. The stock has a beta of 0.52 and a short float of 10% with 4.15 days to cover. Shares are up 34.6% year-to-date as of the close of trading on Tuesday.
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Analysis:
rates Sonic as a
. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 7.3%. Since the same quarter one year prior, revenues rose by 10.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Powered by its strong earnings growth of 28.57% and other important driving factors, this stock has surged by 56.20% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, SONC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- SONIC CORP has improved earnings per share by 28.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SONIC CORP increased its bottom line by earning $0.85 versus $0.64 in the prior year. This year, the market expects an improvement in earnings ($1.07 versus $0.85).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Hotels, Restaurants & Leisure industry average. The net income increased by 22.9% when compared to the same quarter one year prior, going from $8.21 million to $10.09 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, SONIC CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full Sonic Ratings Report.
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